Sasol shares have rocketed 25% in the past week alone, taking this year’s gains to 107%. Sure, an oil price above $80 a barrel and a rand at R15 to the dollar are helping the petrochemicals group, but a series of much greater carbon emissions cuts, laid out to the market last week, means Sasol is no longer in any real danger of becoming uninvestable as SA’s second-largest CO² emitter. The FM spoke to CEO Fleetwood Grobler.
You’ve set out to cut emissions 30% by 2030, and to net zero by 2050, at an extra cost of between R15bn and R25bn. But how, practically, are you going to do this?
FG: As far as the 2030 target [goes], there are three levers we will be using to achieve that reduction. The first category is about energy and process efficiency: you make sure you use less energy in your operations. Maybe you have steam leaks or motors and pumps that consume more energy than they should, so you replace them with different parts. You make sure you don’t have wastage, and that’s the smallest component of the three. The second part is the electricity we buy in from Eskom.
We need about 1,500MW of electricity for our operations in SA. We use about 600MW from our own boilers and gas turbines, but the rest we buy in. That comes with a scope 2 emission — in other words, a coal generation emission, and if we replace that with renewable energy, we avert that.
Who’s going to produce that renewable energy?
FG: We’ve made inquiries with independent power producers and they have to come up and make a bid to us. They could be anywhere in SA. Wind turbines in KwaZulu-Natal, for example, and then they need to make sure they can get the electricity through the Eskom grid to Secunda, and we’ll buy from them on a power purchase agreement. We’ve got quite an oversubscription for the first tranche.
Is Eskom squealing?
FG: No. Eskom itself is pursuing a very aggressive long-term renewable drive, so it still gets its rightful rewards through "wheeling" through the grid, so you pay it for movement of the electricity and it alleviates pressure on its systems, so I think it’s a win-win for SA.
Then the third leg is gas: we’re going to bring in 40-60 petajoules of gas, and that is the biggest component that will help us reduce our need for coal by 25% by 2030.
Where are you going to get the gas from?
FG: At the moment we have the Pande Temane gas fields in Mozambique, and we’re working with the Mozambican government on allocating other concessions in that area. We’ve also been in quite advanced discussions with global gas suppliers, and the point is there we have two options to bring in LNG [liquefied natural gas]: either through the Matolo Gas Company in Maputo, [or via] Richards Bay. We can also bring in LNG; there is a pipeline Transnet operates.
You must be watching with some concern the crunch happening to natural gas prices. Are these the risks you’ll have to deal with, which you don’t have with your own coal mines?
FG: Keep in mind that just over a year ago, the oil price was negative. These commodities go up and down and we believe [in the] long term the oil price will be about $55 real, and the commensurate gas prices coupled with that.
So yes, this is an aberration, like we’re seeing in oil; the price at $80 cannot be there forever. You have to manage these things but when you enter into commercial agreements you take care of these excursions, so that you’ve got a more stable supply and pricing, so hopefully your commercial agreement can negate some of these risks.
If you weren’t doing this, were you at risk of losing your major investors?
FG: Well, the fact is that if we do nothing, we’re not sustainable. You have to fit in with SA’s commitments to the Paris Agreement [on carbon emissions reductions], and if we don’t support this then we become obsolete. So it is about doing the right thing to survive as a company, and to ensure you remain an attractive, investable company.
Was there a way to use coal in a more environmentally friendly way? What happens to all these coal assets?
FG: You know, many other peer group companies have sold their problems away, so we’re addressing our problem at the source.
You can look at coal and say: fine, how much do I need to invest to recover the greenhouse gas footprint, but that investment, compared with taking that same money and putting it in a sustainable long-term option, doesn’t make sense.
Why would you put good money into a thing that’s shaky and over time will get shakier? It makes business sense rather than trying to retrofit [operations] to do carbon capture.
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